France’s 35-Hour Solution

MOLIENS, France — Is the 35-hour workweek, the new brainchild of French Socialists, an economic masterstroke that will soak up nagging double-digit unemployment and set the world standard for the next century?

Or, as one European newspaper suggests, is it the zaniest idea from France’s leaders since Marie-Antoinette told the starving people of Paris to go eat cake?

One of this country’s most prominent industrialists, Jeans-Yves Bloquert, has done the arithmetic for himself and claims that the Socialist formula--to get less time from workers without a corresponding cut in pay--adds up to unmitigated disaster.

At his textile plant on the rolling plains of Picardy, about a half-hour’s drive from the medieval cathedral town of Beauvais, Bloquert’s labor force, mostly women, turns out enough socks--men’s, women’s and children’s--to outfit everybody in California with a pair a year and still have about 4 million pairs left over.

“In France, we already have five weeks of paid vacation,” said Bloquert, 62, president and chief executive of Kindy, a company with more than 900 employees. “With a 35-hour workweek, that will mean by government decree that we pass from five to 10 weeks of paid leave. That’s just not possible for the economy.”

If the Socialists’ plan becomes law, Bloquert says, he will have no choice but to shift some of his production to countries with cheaper labor.

“It’s a royal road to imports,” warned the Normandy-born businessman, who under blue pinstripes sports a pair of flashy Donald Duck yellow hose woven on Kindy’s modern, computerized looms.

Five months into the administration of Prime Minister Lionel Jospin, steward of the world’s fourth-largest economy, the Socialist and his ministers have fallen out with business leaders and some of France’s European neighbors over Jospin’s multi-pronged approach to cutting a 12.5% jobless rate, the highest among major industrialized nations.

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Fully 10% of Western Europe’s able-bodied men and women, or 18 million people, are unemployed, and leaders of the European Union held an unprecedented summit in Luxembourg last week, where they agreed to an ambitious plan to get more of the young and the long-term unemployed into the work force.

Each of the 15-member countries will have to present national action plans outlining how they intend to meet the common targets at another summit in Cardiff, Wales, in June. But the Luxembourg session notably failed to resolve tensions inside the EU about how to reconcile the high level of social protection in most member states with greater labor market flexibility.

In many areas of economic policy, France’s left-wing government, the only one in the Western world to include Communist ministers, has gotten high marks for pragmatism. It has auctioned off such a large chunk of France Telecom, the state-owned telecommunications company, that the sale created the biggest pool of stockholders in French history. Up to 49% of Air France may follow.

Jospin’s government has hiked taxes for some but also cut benefits in its quest to trim state spending to meet the criteria for next year’s single European currency.

But joblessness, the persistent social scourge that cost the former center-right government the national election in June, remains the priority. More than 3.1 million French men and women are now seeking work. Jospin’s Cabinet is proposing two remedies: 350,000 new public-sector jobs for the young, to last for five years, and a cut in the private-sector workweek to parcel out the time now worked among more people.

“I think it’s fair, reasonable and necessary to go to 35 hours without loss of salary,” Jospin, a former professor of economics, has said.

On Oct. 10, after a daylong meeting with labor unions and business leaders at his official residence, the prime minister announced that he would draw up laws to implement the 35-hour week by Jan. 1, 2000. The enabling legislation must be approved by Parliament, where stormy opposition from right-wing lawmakers is certain, but where Jospin’s government can probably get its way.

Steelmaker Jean Gandois, chairman of the CNPF national employers federation, who is known for his willingness to compromise, resigned in a huff, saying his group needed somebody who was more of a “killer” to better defend the interests of business.

The Socialists have offered concessions, including government assistance for companies that voluntarily cut employees’ hours before the laws take effect, and an exemption for companies employing 20 people or fewer, instead of the 10 specified in an earlier proposal. But all firms, regardless of size, would have to be at the 35-hour week by 2002.

In demanding that people work less, and in maintaining a statist hands-on approach to the economy, are the French recklessly sailing against the prevailing international winds of greater labor flexibility and a larger share of part-time jobs? That’s the opinion of some specialists. “Of all the European countries, this is the one where people are the most suspicious of the market,” one Paris-based economist said.

A publication hostile to Jospin, Le Figaro magazine, sharply contrasted his ideas with the free-market pragmatism of Britain’s new Labor leader: “Tony Blair to the English: ‘Work More!’ Lionel Jospin to the French: ‘Work Less.’ ”

The European, a London weekly, evoked Marie-Antoinette’s legendary gaffe in denouncing Jospin’s “great job massacre.” Even at the Ministry of Economy, Finance and Industry, officials scoff at the proposed law’s capacity to generate jobs.

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The critics and French business leaders have totally misunderstood the government’s intentions, said Ambassador at Large Jean-Daniel Tordjman, a globe-trotting salesman for the French economy. “This isn’t for tomorrow, it’s for three years from now,” he stressed. A lot remains to be negotiated, Tordjman added, and “the government objective is to get more flexibility [at the workplace] in exchange for this reduction.”

That will be welcome news for many entrepreneurs and business leaders. Because of the high costs and rigidity of French labor, many French companies have pared employment to the bone in recent years, becoming highly competitive in international markets in the process.

Growth, long flat, is starting to hum at such a clip that government officials predict 5.3% to 5.6% total growth in 1997 and ‘98, enough to add wealth ($80 billion to $90 billion) twice the size of Singapore’s before October’s Asian market crisis.

True, in France, where people are taxed more than anywhere else in the industrialized world, profit margins aren’t the same as in developing countries. “But what good is it to make 30% profits if you lose half of your assets?” said Tordjman, contrasting French stability with Asia’s recent market turmoil.

Competition may be unprecedented and European integration ever stronger, but French business holds a goodly number of trump cards--among them, a geographical location in Europe’s heart, superb roads and other infrastructure, innovative high-tech industries and the world’s third-most-productive labor force in manufacturing. But many employers fret that unless the government allows them more freedom, especially in the labor market, they will be heading toward the economic equivalent of the battle of Crecy.

In 1346, on a field in Picardy about 50 miles from the Kindy factory at Moliens, a mounted force of French knights was soundly beaten by English bowmen and foot soldiers only about a third of their number. In the end, the French were weighed down and turned into sitting ducks by the very armor that was meant to protect them.

In today’s “terrible” international competition, French factories and labor forces must be free to decide how best to organize production, right-wing President Jacques Chirac has said, plainly distancing himself from Jospin.

Jean-Marc and Arlette Epitaux, a couple competing for contracts in the increasingly cutthroat European market for adhesive labels, agree.

Their family business, Imprim’Etic, prints $5 million worth of labels annually for shampoo, champagne and other consumer products. “Under the principle of just-in-time delivery, some of our customers want delivery in two days,” said Arlette, 50, the company’s president. “But if I want one of our people to work on the weekend to help meet an order, the law now says I have to tell him a week in advance.”

At the small plant in Bondy outside Paris, operating on Sundays is out of the question, Epitaux said, since that would require advance permission from state labor inspectors, and they would tell her to hire more people rather than pay overtime to the work force of 26.

Even current French overtime regulations, she said, put her at a disadvantage. In England, she said, competitors can ask their workers to put in a 44 1/2-hour week on straight pay, then tack on a 30% hourly premium for all overtime. In France, only the first three hours above the legal workweek, fixed at 39 hours since 1982, are paid at an extra 30%, then surcharges climb as high as an extra 100%.

Epitaux’s Swiss-born husband, also 50, is in charge of sales and production. He said Jospin’s plan would be equivalent to dishing out 11% raises for no corresponding hike in productivity. “We are digging our own grave,” he said.

The new laws, Arlette Epitaux says, would hamper efforts to increase employment--Imprim’Etic would have to freeze hiring and raises for two years and put off expansion plans. But she concludes that she and her husband could live with the rules, if labor regulations were changed to allow Imprim’Etic’s printers to put in longer hours at little or no overtime when there are large orders and to take time off in slack periods as compensation.

Such practices in France come under the term flexibilite, which remains such a controversial concept that employers often talk of it in euphemisms such as “hour bank,” which refers to an annual bank of hours that management could tap according to production needs.

Next year, under Jospin’s proposal, a law would officially set the objective of a 35-hour week. A second, more detailed law in 1999 would spell out the details. Nicole Notat, secretary general of the Socialist-aligned CFDT labor federation, has predicted that in making this change, France would be a “locomotive” for the rest of Europe, where workweeks in most countries now average 39 to 40 hours.

But the response to reduced workweeks already in place in other European countries has been decidedly mixed. The 35-hour week “is certainly not a panacea or a universal remedy against unemployment,’ Padraig Flynn, social affairs commissioner for the European Union, said in a newspaper interview. “If it were adopted as a general policy, it would create difficulties for companies, increasing their costs.”

Germany’s biggest union, IG Metall, won a blanket 35-hour contract in October 1995. The result since then, the Federation of German industries (BDI) contends, is crisis and “massive devastation of jobs” in metallurgy and related sectors. Last April, arguing that it would help fight unemployment, IG Metall chief Klaus Zwickel proposed a joint campaign with all unions to roll the German workweek even further back, to 32 hours, for everybody beginning in 1999. The BDI blasted the idea as a “dangerous drug,” and other unions were cool because it might mean pay cuts.

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In a deal with hard-line Communists that saved his government last month, Italian Prime Minister Romano Prodi agreed to a gradual reduction of the workweek from 40 to 35 hours by 2001. But Cofindustria, the employers federation, says the plan will boost the country’s wage bill by $17.4 billion. Italy’s unions, fearing employers will insist on corresponding salary cuts, would rather work and be paid for 40 hours.

Christian Sautter, France’s secretary of state for the budget, predicts 42,000 new jobs will be generated next year by voluntary labor-management programs to cut back to 35 hours. Growth, he said, should generate 200,000 additional jobs.

Ordinary French, though, remain skeptical. One newspaper poll found that although more than 60% of people polled approved of Jospin’s proposal, about the same number doubted it would do anything to cut unemployment.

Steven Englander, a Paris-based international economist for investment bank Smith Barney, concurs. Cut hours, he said, and workers’ productivity during a shorter shift typically rises a bit. That means that with an 11% cut in time worked, the loss in output might be only 5% to 6%.

“A lot of businesses are going to say, ‘Fine, we’ll take a pass on hiring somebody new to make up that 5%,’ ” Englander said. “This is just another incentive for companies to cut payrolls and to replace people with machinery, a process well underway in France. That’s no way to create jobs.”

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Time to Work

The French work fewer hours per week than most other industrialized nations. A comparison of France’s average hourly workweek with other countries:

Sweden: 36.4

Spain: 36.8

France: 38.9

Canada: 39.8

Britain: 40.1

Germany: 40.1

Poland: 40.6

United States: 42.0

Japan: 43.5

South Korea: 47.6

* All figures are for 1994.

Source: International Labour Office

Researched by JENNIFER OLDHAM / Los Angeles Times